Salty or sweet?

The key reason why organizing your company to fully align to a value discipline is so that people will get how your value proposition relates to them. People simply resonate with one of three major types of value. ( Yes, there are exceptions, hybrids and the lock-in strategy, but broadly this is true) I thought of an analogy last night.

Let’s compare this to food. When you ask people what kind of snack foods they like, you will often get one of a couple things. Most commonly, you’ll hear “salty” or “sweet” or perhaps the person is into really decadent foods like wine and cheese pairings. It’s just how people are wired. It’s the major categories that people associate with.

When someone is on the hunt for the hottest new gadget, a solution that fits perfectly in their gap… or the cheapest X they can find, will you stand out? Or will they see you as kind of bland? Does this clear value propositon polarize customers positively or negatively? It sure does, but that’s the point. You can’t be attractive to all kinds of customers at one time.

Tag it and bag it

So now that you have your strategy map and your scorecard as a 1:1 relationship between the measures and the objectives, there’s a small but powerful add-on that can add clarity as to how you plan to achieve those results. Sometimes, it’s useful to tag each measure with how the outcomes are generated, partly to ensure everyone is aware of accountability and partly to ensure that it gets done.

For example: Some measures apply to the performance plans of externally facing, sales oriented groups. Others apply to HR strategy formulation. Others still apply to executive performance plans (in addition to accountability for results) in the way of managing how outcomes are achieved. This makes standardizing performance management a lot simpler, and clarifies accountability for who is on point for making things happen.

Simple and powerful.

When is good… good enough?

When you’re talking about corporate performance, the answer needs to be “never!” Companies that become too pleased with what they have accomplished fall into one of the biggest traps of all: sacrificing a position of strength because of complacency.

I like to think of this as floating down a river, with competitive and market forces representing the current. Many river analogies have people picturing themselves floating downstream. For this one, that’s backward. Now, picture yourself turning the boat around pointing upstream, with your goal being pushing against the current. In most industries, not paddling doesn’t result in standing still… it results in you going backward, away from your objective. The industry determines the dynamics of the current.

Companies that become too satisfied with how far they have traveled up stream sometimes put the paddles down to celebrate. They feel they have gone far enough, and their good performance is now “good enough.” No one says this out loud, but you can tell. One of the many problems these companies encounter is that when there’s no more dissatisfaction with how things are, 2 things happen. 1) continuous improvement and the reason to change disappears 2) there’s no longer a reason to build or pay attention to strategy.

One of the fundamental theories of change management is that in order for change to happen, that dissatisfaction with how things currently are, a vision for how things can be different and agreement on the first steps to get there have to be greater than the resistance to change. When there is no dissonance, there is no motivation. Secondly, strategy is about change. When there’s no perceived reason to change, there’s no perceived reason to pay attention to strategy.

Celebrating is a very important part of a healthy culture, especially when something significant is achieved. Just remember, that when you’re done patting yourself on the back, remember to pick the paddle back up.

Always trade good for better.

Performance gaps equals progress

Corporate target setting is a complex field. Often overlooked as a quick exercise, the impact that first choosing a measure, setting a target and then attaching someone to it can be very powerful. It also sets the temperature in terms of the degree to which action is required. Are there areas within your organization that coasting is allowed? This is to a large degree determined by targets and the resulting accountability.

The desire to achieve a certain range of a numerical result has been ingrained in us since kindergarten. Anyone that has both passed and failed a test knows the drill. Achieving targets elicits the same kind of response, except the stakes are even higher in the workplace. Your credibility as a professional and a leader come into play when failure occurs for the wrong reasons. Now let’s not forget that there are good reasons to fail. Many evolved companies require their people to go to the edge and experience failure as evidence that they are maxmimizing potential and taking risks.

Because of the visibility of corporate scorecard results, you want to set your leaders up to succeed. There are two ways to do this. The first is to set targets that you can easily achieve. This is great in the short term, but destroys any value that a scorecard has, by eliminating accountability for a real performance gap. Remember that gap you set between your last result and your next result (performance gap) represents the degree of progress. The second way is to ensure that adequate action is established which will allow you to achieve the targets, and to make sure that accountability exists not only for results but for the action that is likely to create those results. If an improvement in a net promoter score is targeted, how does the organization plan to achieve that? Don’t rely on operational teams to solve this without strategic direction to drive it out.

So how can you tell if an organization is setting targets that are actually a stretch? If you’re on the board, start by looking at what tangible plans have been established to strengthen results and ask whose performance plans it’s on. If you have measures that aren’t linked to something significant in an executive’s performance plan, it’s more likely to be an area the organization is coasting.

Blame it on the scorecard

A couple years ago, I started seeing articles about how some companies were disappointed that they didn’t achieve breakthrough results after having implemented a balanced scorecard. The gist of the articles seemed to be that the positive impact was minimal, and they were disappointed. Perhaps the practitioners read the Kaplan/Norton books on achieving an execution premium and had expected more. To me, their focus was on the wrong things. A balanced scorecard is merely one of many tools, and certainly one that only works when it’s surrounded by the proper components of a complete strategy management system. The value of the complete system that Kaplan and Norton put forward includes the balanced scorecard but it’s more about the impact that a comprehensive system has. Of course measurement resides in the middle of that system, but it doesn’t create success on its own.

To support that notion, it’s interesting to note that Kaplan and Norton often start their case for the scorecard with information around leadership and management process, rather than talking about measurement. For instance, their research has for many years showed that:
– 5% of employees understand the strategy
– 25% of managers have incentives linked to the strategy
– 60% of organizations don’t link budget to strategy
– 85% of executive teams spent less than one hour/month discussing strategy

In this environment, who would expect anything different? Translating your strategy into a series of measures and consistently driving toward them is a key method for creating strategic progression, but what else is required?

BHAG: I come to this conclusion time and again. Without a compelling vision, a succinctly articulated potential future, you don’t have a burning platform for change. This leads us to the next component…

Leadership: You can’t talk strategy without talking about leadership. It’s a fact that your strategy won’t be any more powerful than the quality of your leadership. By leadership, I don’t mean authority or management… I mean real leadership. BHAGS require leaders with courage and confidence. Companies with real leaders are more likely to have compelling BHAGS.

Measures: Every measures drives a corresponding behavior, so think this through. Be flexible in your ability to change measures, for the right reasons, but do your best to ensure it translates strategy into desired outcomes.

Culture: It’s been said that culture trumps strategy, every time. And it’s true. Like leadership, you can’t talk strategy without talking about culture. Glossing over this in the hopes of “getting there faster” is a mistake. Can’t be done.

Strategic clarity: You can only get people to do things that you can describe. Engage in the hard work of being able to answer all of the hard questions you know people are thinking… and make it clear what, how, when, and why your direction is what it is.

Measurement is at the core of strategic management, but it’s not an island unto itself. When all of the components are integrated, there’s no telling what you could accomplish. The potential of your organization will skyrocket once you optimize your strategy management, and the components around it (BHAG, Leadership, Measures, Culture, Clarity) but rarely before. It’s worth the effort.

BHAG

All of the strategy work in the world doesn’t amount to much if it doesn’t point to something compelling. Strategy practitioners spend a lot of time working to define a strategy, create line of sight, build strategy maps, build balanced scorecards that have performance gaps to drive performance in the right areas. If you still don’t have the degree of strategy focus in your organization, it probably comes down to one of two things.

The first place to look is whether you have a Big Hairy Audacious Goal, a B-HAG. If you don’t have a B-HAG, if you can’t articulate the strategy in 50 words or less, chances that anyone is paying attention is pretty low. One of the most foundational elements of strategy, one of the toughest to build, and one that requires the most courage is not surprisingly not present or not strong enough.

The second place to look is to take a long cold look at the degree of leadership. Not titles, not people who can give a good speech… but leaders. People who take the BHAG to the masses and drive change. People that are trusted, and walk the talk. Strategy will never go far without real leaders to create motility.

So before you assume that exciting strategy worth writing about is only for companies like Apple or the like, don’t give up so easily. If you have a BHAG worth paying attention to and the leaders to make it happen, there’s no telling what you can do.

Bringing your strategy to life

If strategy is how you align todays actions to create a specific outcome in the future, to what extent are your actions today being driven by strategy? If strategy management isn’t deeply ingrained in your culture, this kind of thinking will feel like a competing focus for your employees. Sometimes even with management. And yet, operational activity without the guidance of a strategy is like building a house without taking the time to consult the blueprint. Strategy is a unifying force within an organization, which counteracts the short-term thinking that an excessive operational focus tends to generate.

So how do you take a strategy and actually bring it to life?

It all starts with the recognition that the strategy is the most important piece of directional focus within the organization. It’s can’t be seen as a series of platitudes, it has to have weight. Then, there must be a concerted effort to regularly go back to the plan to ensure you are aligned. Then, over time, it becomes more like second nature until you reach a critical mass within your organization. Leadership is ultimately what brings it to life and makes it pervasive within the organization.

Once you are confident that you have the right strategy, turn your focus to the consistency with which the organization lives that out. With true leaders in place, and processes that drive accountability and consistent focus, help people see the compelling nature of your potential future. There is nothing simple about managing change, transformation or strategy, but in the end … there are no better alternatives.